Hi Bogleheads! We’re relatively new to investing and recently realized that we need to figure out what to do after maxing out our tax preferred/deferred accounts. We had been planning to pay off our last student loans, but they are locked in at a favorable interest rate that’s lower than our high-yield savings accounts, so we haven’t paid those off yet. At the same time, one partner is moving from private employment to the federal government and that partner has a number of old 401ks that should probably be either consolidated or rolled into a TSP account. As relevant for tax considerations, we’re unmarried, co-own a home, and manage our finances together.
Emergency Funds: Yes, we have these.
Debt:
Mortgage (in both partners’ names): ~$715k @ 2.875%
Student Loans (Partner 2’s; we paid off Partner 1’s first) - ~$150k @ 3.3% interest rate
The monthly payments for the mortgage and loan payments total to ~35% of Partner 1’s current monthly take-home pay (after tax).
Tax Filing Status: Single
Tax Rate:
Partner 1 - 35% Federal, 9.25% State
Partner 2 – Uncertain for 2024, due to Partner 2 taking a few months between jobs without income; assume 24% Federal, 8.5% State
Tax Jurisdiction of Residence: DC
Ages: Early-to-mid 30s
Desired Asset allocation: 90% stocks / 10% bonds ??
Desired International allocation: 20% of stocks ??
Size of Portfolio: ~500k
Investment Assets
Separate from our emergency funds, we had planned to pay off student loans but due to interest rates have kept funds in high-yield savings accounts instead of making a lump payoff. We’ve been using income for the loan payments (and in an emergency could continue to make the payments for several months from our emergency funds without dipping into the cash noted here). We are considering using the cash from high-yield savings accounts to purchase ETFs through a taxable brokerage account. See Question 1.
Taxable
23.15% cash in savings account with 4.5% APY
20.10% case in savings account with 4.6% APY
Partner 1 401k at Schwab
20.39% Schwab Indexed Ret Tr Fd 2050 I
Partner 1 Roth IRA at Vanguard
2.17% VOO Vanguard S&P 500 ETF
0.54% VXUS Vanguard Total International Stock Market
Partner 1 HSA at Schwab
0.30% BNDW Vanguard Total World Bond
1.69% VOO Vanguard S&P 500 ETF
0.43% VTI Vanguard Total Stock Market
0.27% VXUS Vanguard Total International Stock Market
Partner 2 Old 401k at Fidelity
0.10% Unknown Fund
Partner 2 401k at Fidelity
12.44% Fid Frdm BLND 2055R
Partner 2 401k at Schwab
9.04% T. Rowe Price Ret Hybrid 2055
Partner 2 Roth IRA at Vanguard
1.80% VFFVX
4.34% VTSAX
Partner 2 Old HSA at Betterment (These were automatically selected, we didn’t do this)
0.38% VTI
0.09% VTV
0.06% VBR
0.07% VOE
0.15% VWO
0.28% VEA
0.01% STIP
0.01% VTIP
0.04% AGG
0.04% BNDX
0.02% EMB
Partner 2 Old HSA
2.07% VFIFX Vanguard Target Retirement 2050 Fund
New Annual Contributions
$23k Partner 1 401k (no match)
$23k Partner 2 TSP? See Question 2.
$7k Partner 1 Roth IRA
$7k Partner 2 Roth IRA
Max Partner 1 HSA
Taxable: ~80k/year at current income
Questions
1.Recognizing that we still have the student loans, how should we weigh risks when we consider putting the cash sitting in high-yield savings accounts into the market? Given our ages, we have plenty of time to focus on growth, but the debt exists (recognizing that it’s a very manageable payment at 35% of one partner’s income). With our current income, does the debt matter as we consider allocation of stocks/bonds/cash for the funds currently in the high-yield savings accounts?
2.We plan to consolidate Partner 2’s 401ks. Partner 2 is in the process of moving jobs and will no longer have an employer 401k and will instead have access to the TSP program. What factors should we consider as we look to consolidate the old 401ks and consider rolling those into the TSP. Should we keep them in one consolidated 401k account that has more fund options and use the TSP going forward? Also welcome any suggestions for Partner 2’s old HSAs.
3.Regarding the student loan debt, we understand it may be possible to open a 529 for yourself. Is this worth looking into for a tax deferred way to potentially reduce AGI and pay off the debt? We have no plans to go back to school, but are curious if this is a better way to tackle the remaining student loan debt (assuming we don’t just pay it off from the high-yield savings accounts).
4.As noted above, we are unmarried. We may get married. Aside from the change to our tax bracket, are there tax or other implications that change that answers to any of the above if we were to change our marital status? Assume we open a joint taxable brokerage account if we move the cash into the market.
5.Other reactions/suggestions?
Emergency Funds: Yes, we have these.
Debt:
Mortgage (in both partners’ names): ~$715k @ 2.875%
Student Loans (Partner 2’s; we paid off Partner 1’s first) - ~$150k @ 3.3% interest rate
The monthly payments for the mortgage and loan payments total to ~35% of Partner 1’s current monthly take-home pay (after tax).
Tax Filing Status: Single
Tax Rate:
Partner 1 - 35% Federal, 9.25% State
Partner 2 – Uncertain for 2024, due to Partner 2 taking a few months between jobs without income; assume 24% Federal, 8.5% State
Tax Jurisdiction of Residence: DC
Ages: Early-to-mid 30s
Desired Asset allocation: 90% stocks / 10% bonds ??
Desired International allocation: 20% of stocks ??
Size of Portfolio: ~500k
Investment Assets
Separate from our emergency funds, we had planned to pay off student loans but due to interest rates have kept funds in high-yield savings accounts instead of making a lump payoff. We’ve been using income for the loan payments (and in an emergency could continue to make the payments for several months from our emergency funds without dipping into the cash noted here). We are considering using the cash from high-yield savings accounts to purchase ETFs through a taxable brokerage account. See Question 1.
Taxable
23.15% cash in savings account with 4.5% APY
20.10% case in savings account with 4.6% APY
Partner 1 401k at Schwab
20.39% Schwab Indexed Ret Tr Fd 2050 I
Partner 1 Roth IRA at Vanguard
2.17% VOO Vanguard S&P 500 ETF
0.54% VXUS Vanguard Total International Stock Market
Partner 1 HSA at Schwab
0.30% BNDW Vanguard Total World Bond
1.69% VOO Vanguard S&P 500 ETF
0.43% VTI Vanguard Total Stock Market
0.27% VXUS Vanguard Total International Stock Market
Partner 2 Old 401k at Fidelity
0.10% Unknown Fund
Partner 2 401k at Fidelity
12.44% Fid Frdm BLND 2055R
Partner 2 401k at Schwab
9.04% T. Rowe Price Ret Hybrid 2055
Partner 2 Roth IRA at Vanguard
1.80% VFFVX
4.34% VTSAX
Partner 2 Old HSA at Betterment (These were automatically selected, we didn’t do this)
0.38% VTI
0.09% VTV
0.06% VBR
0.07% VOE
0.15% VWO
0.28% VEA
0.01% STIP
0.01% VTIP
0.04% AGG
0.04% BNDX
0.02% EMB
Partner 2 Old HSA
2.07% VFIFX Vanguard Target Retirement 2050 Fund
New Annual Contributions
$23k Partner 1 401k (no match)
$23k Partner 2 TSP? See Question 2.
$7k Partner 1 Roth IRA
$7k Partner 2 Roth IRA
Max Partner 1 HSA
Taxable: ~80k/year at current income
Questions
1.Recognizing that we still have the student loans, how should we weigh risks when we consider putting the cash sitting in high-yield savings accounts into the market? Given our ages, we have plenty of time to focus on growth, but the debt exists (recognizing that it’s a very manageable payment at 35% of one partner’s income). With our current income, does the debt matter as we consider allocation of stocks/bonds/cash for the funds currently in the high-yield savings accounts?
2.We plan to consolidate Partner 2’s 401ks. Partner 2 is in the process of moving jobs and will no longer have an employer 401k and will instead have access to the TSP program. What factors should we consider as we look to consolidate the old 401ks and consider rolling those into the TSP. Should we keep them in one consolidated 401k account that has more fund options and use the TSP going forward? Also welcome any suggestions for Partner 2’s old HSAs.
3.Regarding the student loan debt, we understand it may be possible to open a 529 for yourself. Is this worth looking into for a tax deferred way to potentially reduce AGI and pay off the debt? We have no plans to go back to school, but are curious if this is a better way to tackle the remaining student loan debt (assuming we don’t just pay it off from the high-yield savings accounts).
4.As noted above, we are unmarried. We may get married. Aside from the change to our tax bracket, are there tax or other implications that change that answers to any of the above if we were to change our marital status? Assume we open a joint taxable brokerage account if we move the cash into the market.
5.Other reactions/suggestions?
Statistics: Posted by NinersFan — Sun Jan 21, 2024 7:10 pm — Replies 0 — Views 2